Flexsteel Industries, Inc. announced Wednesday afternoon that it will cease operations in Harrison in mid-August, leaving about 110 employees without jobs, and it apparently is part of a larger restructuring of the furniture company.
A letter from the company’s in-house corporate counsel was sent to the Department of Workforce services in Little Rock in accordance with provisions of the Worker Adjustment and Retraining Act, then forwarded on to Harrison Mayor Jerry Jackson.
The letter said the closure will be permanent.
"We are notifying all affected employees that their positions will be eliminated due to the closing, and that their separation from employment will be permanent,” the letter said. “All affected employees are expected to be separated from employment on August 20, 2019, or within the fourteen-day period beginning on that date."
In a statement, Harrison Regional Chamber of Commerce president and CEO Bob Largent said officials are putting a team together to help those displaced workers find other employment as soon as possible.
“The governor is engaged, as is Mike Preston, executive director of the Arkansas Economic Development Commission,” Largent said. “We're pulling out all the stops. Each of our industries have been included, as well as North Arkansas College, Department of Workforce Services, the Boone County Economic Development Corporation and more…”
Jackson said there are even a few jobs open with the city, which he described as a family environment.
According to the company’s website, the Harrison plant was developed as a central source for furniture frames in 1958. Largent said there were only a few employees working at the plant on Highway 65 South and the rest were employed at the upholstery facility on the Bypass near Wood Motor Company.
Neither Jackson nor Largent said they were informed of the plan to close the facilities until word began to spread Tuesday night.
According to The Associated Press, Flexsteel announced in May an initial restructuring action to increase organizational effectiveness and gain manufacturing efficiencies to position the company for long-term success.
This first action includes exiting the commercial office and custom-designed hospitality product lines. In addition, the company planned to close its Riverside, California, manufacturing facility. “The company expects to complete the wind down of these product lines and the closure of the manufacturing site within the current quarter,” the AP reported.
Jerry Dittmer, president and CEO of Flexsteel Industries, told the AP in May that exiting businesses and reducing staff was not an easy decision.
“The commercial office and custom-designed hospitality product lines we are exiting represent approximately 7% of our annual revenue and did not align with our strategic direction to focus on profitable core businesses,” Dittmer told the AP in May.
On Tuesday, Flexsteel announced its plan to take action on several key initiatives over the next two years, the AP reported. These actions will include optimizing sales, general and administrative (SG&A) expenses, right sizing its manufacturing footprint, and streamlining its supply chain, as well as monetizing certain assets.
As a result of these planned actions, the company expects to incur pre-tax restructuring and related expenses of approximately $48 million to $53 million over this two-year timeframe of which approximately $36 million to $40 million will be cash and $12 million to $13 million non-cash. This range includes the $13 million of restructuring and related expenses announced in May to facilitate the exit of the company’s commercial office and custom designed hospitality product lines as well as the closure of its Riverside, California, manufacturing facility. The company estimates that lower employee-related costs and significantly improved efficiencies will result in an annualized, on-going cost savings of approximately $27 million to $32 million on a run rate basis to be achieved by the end of fiscal 2021. In addition, the company plans to list several properties for sale when the footprint optimization is completed. When these properties are sold, the company expects to generate $45 million to $55 million in cash dependent upon market conditions at time of sale.
“In a relatively short period of time, our team has performed a thorough evaluation of the strategic direction and operations at Flexsteel with the goal of improving the customer experience, simplifying the business, reducing costs, and ultimately creating shareholder value,” Dittmer told the AP in Tuesday’s report. “We are having to make some difficult decisions in this process, but know these steps are in the best interest of the long-term success of the company and our shareholders. Right now, we are deep into the execution phase of the plan and will be able to share more specific detail when we announce fourth quarter results in August.”
On June 4, the company’s board of directors declared a quarterly dividend of $0.22 per share, payable July 1, 2019 to shareholders of record as of June 14, 2019.
Flexsteel has paid cash dividends on its common stock each year since 1938. This is the 310th consecutive quarterly cash dividend. The company believes that its cash flow and operating income levels support the dividend, the AP reported.